Banks or telcos? Who sets the ‘push’ and ‘pull’ fees?

The costs incurred in transferring funds from one’s bank account to their mobile money wallet caused a stir on social media platforms last week with most citing that it could be an inhibitor of cashless payments uptake. Users raised concerns that the costs incurred in transferring funds from their bank accounts to their mobile wallets, commonly termed as pulling, was significantly higher than charges incurred when withdrawing from an Automated Teller Machine. This, they said, risked undoing gains made in previous months in cashless payments uptake. “@MTNRwanda and Banks you are not helping the @RwandaGov agenda of cashless economy by charging clients push and pull fees that are way higher than withdrawing from ATM or Momo Agents. This needs to be resolved,” one Richard Mutabazi lamented on Twitter. This sparked a barrage of complaints from frustrated users, many saying the disparity in charges by different banks was even more suspicious, while others said they were contemplating returning to the old ways of getting their money over the counter. Influencing factors The prices, according to banks interviewed, are set individually largely based on costs incurred in the transactions, third party costs, recovering investments made in setting up the systems while others will factor in convenience fees. Convenience fees factor in what one would have otherwise paid to physically walk into a bank to make a withdrawal or an Automated Teller Machine. During the pull transactions, banks also pay interest when funds are moved from the client’s bank accounts to a trust account held by the telecommunication company sitting in the same bank. Banks pay an interest on the funds held in the trust account at a rate of about 6 per cent. Thus, moving funds from one’s bank account to a mobile money wallet means that banks have to pay interest on the money in the trust account. Technically, banks would prefer that a clients funds remain in the (clients) bank account as opposed to a mobile money wallet where they have to pay interest. These interest rates have also been cited by some as the reason behind the charges levied on clients. Across the local market, the costs to pull for instance Rwf40,000 from one’s bank account to mobile wallet range from Rwf200 to Rwf1000. Clients compared the ‘pull’ costs with ATM charges for withdrawal which is often priced at about Rwf200 per transaction. With the ‘pull’ costs often higher than ATM charges, many fear that it could lead users to prefer cash as it’s cheaper to access. Setting costs At Equity Bank, which has arguably the highest number of clients in the local market, officials told this paper that the pricing methodology for their pull services is informed by costs incurred and convenience fees. “The pricing methodology includes cost-plus and convenience fees pricing. The cost-plus and convenience fees are charged by the bank (Equity) to subsidize not even cover the direct cost involved in mobile banking system development and maintenance payable to third parties,” Athanasie Niragira the Head of Marketing and Communications said. Among the costs that the bank has incurred in facilitating the transactions, she said include development of a mobile banking system, integration costs, software and its maintenance. Other costs include back-office reconciliation resources, customers care support centre and IT resources deployed to support mobile banking. Additionally, she noted that during every pull transaction, they incur a cost of SMS notification and USSD session charges (paid to telco) all of which go into the cost. For instance, when pulling Rwf10,000 from the bank, one incurs a charge of Rwf500 which the bank noted factors in a convenience fee comparing what the customer would have incurred to travel to an ATM or a bank branch or agent. During the transaction, Equity Bank incurs direct costs in; two SMS notifications, session costs charged by the Telco as well as technology uptime costs. Bank of Kigali Business team told The New Times that for them, the cost charged in pulling funds is informed by costs incurred in running the platform, (cost of alerts and the costs USSD levied by MTN Rwanda.) The bank said that the pull costs are not a revenue stream for them. The bank charges Rwf 200 to transfer funds from ones bank account to Mobile Wallet. Xavier Shema Mugisha, Chief Business Officer at Banque Populaire du Rwanda explained that considering that banks have made an investment to avail the infrastructure for the transfers as well as maintenance costs, the fees levied go into covering the costs and recouping the investment. Mugisha said that with much progress made across the financial sector towards cashless payments, there is a need for industry-level discussion among the banking sector to agree on a way forward on pricing that will not discourage use of the avenue. BPR which is estimated to have the second-largest customer base in the country, charges Rwf600 to pull Rwf40,000 from one’s bank account. Moving money to bank account from mobile money wallet On the other hand, moving funds from MTN’s Mobile Money to one’s bank account costs between Rwf100 (for 1000) and Rwf5000 (for sums above Rwf500,000). This transaction is colloquially known as push. Chantal Kagame, the Chief Executive Officer of the newly created Mobile Money Rwanda Ltd defended the costs saying that they go into costs such as agent fees (about 0.8 per cent of value of funds involved), back-office reconciliation resources, customers care support centre and other tech resources. According to the e-money regulations, the proceeds of the interest rates earned from the trust fund (when funds are moved from an account to Mobile Money) are supposed to be redistributed to mobile money clients as they are the owners of the funds that earned the interest. Kagame said that the interest rate earned by the funds held in the trust funds is not counted as telco revenue and is held in an interest account which is reported to the Central Bank on a monthly basis since 2016 as they engage the regulator on appropriate use or distribution of the funds. She allayed fears that the costs could undo gains made in cashless payments uptake noting that the push and pull fees noting that industry-level engagement with sector stakeholders will come in handy in addressing any concerns that emerge. She also noted the importance of clients understanding the rationale behind the pricing. I&M Bank Rwanda this month introduced charges for the service (after previously not charging) setting the cost at Rwf 400. Robin Bairstow, the Managing Director of I&M Bank Rwanda explained that it is not unusual for a bank to cover costs incurred in managing and upgrading the technology involved. Going forward, Bairstow who is the chairperson of the Rwanda Bankers’ Association said that there has been engagement with the Central Bank who are conducting market research which will culminate in an industry-wide dialogue to ensure that customers are not disadvantaged. The Central Bank had not responded to queries on the subject by press time.

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Banks or telcos? Who sets the ‘push’ and ‘pull’ fees?